Running a small business takes hard work and dedication. It also requires you to have capital up front to cover planned expenses, from leasing a space and hiring employees to obtaining insurance. Every business also incurs unexpected costs like new equipment, permits and licenses and supplier price increases.
To ensure you have the cash to sustain operations whether your revenues are flush or flagging, you need to secure the right financing through a bank who knows small business and specializes in lending products right for your businesses’ size, industry and aspirations.
What Are the Qualifications for a Small Business Loan?
Every business is unique. So, if you do have specific questions about applying for a business loan, it's best to talk to a lending expert, who can help you find the right resources. At Heritage Bank, our team of commercial lenders and branch managers are small business banking experts averaging 20 years of banking experience.
The best way to understand your credit options is to speak with an experienced banker. In preparation for that conversation, there are three tips for how to qualify for a small business loan.
Tip 1: Establish Good Credit - Both Personal & Business
In order to apply for any type of loan—whether it's for a credit card, new car or a lease on a building—you need to first prove you're able to pay off borrowed money in the time allotted to you. Credit scores can range from 300-800. So, the closer you are to 800, the better FICO score you receive.
Why would I need to show my personal credit score if I'm applying for a business loan?
Even if you already have business credit, your personal credit score is a factor in business lending decisions. A personal credit score is an indicator of how you manage debt.
What If I Don't Have Business Credit Yet?
If this is your first business startup, it's normal to feel nervous. Learning how to apply for a small business loan is something every successful small business owner needs to know. But there are a few simple steps you can take to help build credit for your business even before you speak with a banker.
According to the U.S. Small Business Association, you can build a company credit profile with the following steps:
Step 1: File your business under a separate legal entity (i.e., corporation, limited liability partnership, etc.).
Step 2: Apply for a tax identification number for your business.
Step 3: Apply for a business credit under your company's name. Common methods include a business credit card, service credit or retail credit.
Monitor your business credit profile as closely as your personal credit profile. Remember, you want both profiles to demonstrate that you are reliable borrower with a track record for paying on time.
Tip 2: Organize Your Paperwork
Business loan applications require documentation of your identity and the performance of your business. Be prepared to supply the following to a lender:
-Driver's License or some form of photo ID-Social Security Card
-Business License
-Business Tax ID & Income Tax Returns
-Bank Statements- Both Personal and Business
Depending on the size of your company, and the number of year you've been operating, you may also need to provide lease agreements, financial statements, payroll spreadsheets and information from other fixed and variable expenses.
Contact one our experienced commercial lenders to schedule a consultation to learn the kind of documentation required for a loan application or alternative documentation if standard documents are not readily available. Heritage Bankers are also able and willing to look at complicated or unique financial statements for small businesspeople trying to spin off part of an existing business or purchase a business with a short track record but big potential.
Tip 3: Prepare Your Business Plan
One of the reasons Heritage Bankers enjoy partnering with entrepreneurs is the passion these businesspeople feel for the ventures they’ve started or run. One of the advantages of working with a community bank based in your region and with experienced commercial lenders is their expertise and willingness to personally counsel small business leaders about ways to stabilize or grow their businesses.
The fastest route to securing a small business loan is to have a solid business plan detailing your business strategy and financial projections. Be ready to explain your five-year growth plan. Do you need a loan or line of credit to reduce expenses in the long-term or to increase your revenue?
If you don’t have all of these answers today, don’t panic. A Heritage Banker has been there and done this hundreds, if not thousands of times. They can coach you through the ways to evaluate your business and refer you to resources in the community dedicated to helping new entrepreneurs or experienced businesspeople trying something new. Many Heritage Bank business customers credit their banker with guiding them through some of the most critical business decisions of their lives as well as steering them away from risky ideas.
Looking for the Best Small Business Loan?
At Heritage Bank, we understand your immediate need may be to secure funding for your business, but know that choosing the right banker and the right bank is critical to your long-term success.
Heritage Bank offers a range of lending solutions, including business lines of credit, equipment loans, commercial real estate, and Small Business Administration (SBA) financing. Our commercial lenders are also empowered to look at various loan structures to ensure you get the best small business loan for your situation.
Start the process of applying for a small business loan and building a key business relationship with an experienced commercial banker today.
